MONEY The Economy

WATCH: These 3 Companies Can Raise Prices Without Losing Your Business

Netflix, Amazon, and Chipotle have raised prices without losing the support of their customers or investors on Wall Street.

MONEY Shopping

Parents Worry More About Back-to-School Shopping Than Bullying

Chewed Pencil
Chip Forelli—Corbis

Students themselves, meanwhile, are most stressed about having to wake up early for school in a few weeks.

The back-to-school prep period is a particularly stressful time of year for parents and children alike. According to a survey that was commissioned by the coupon site ebates and is being released this week, nearly all of the adults and teens polled said that the start of the school year was stressing them out in one or more ways.

Perhaps unsurprisingly, the teenagers surveyed overwhelmingly said that they were most concerned that school would mess up the leisurely (lack of) schedule that they’re enjoying over the summer. The top two named sources of stress for teens were “Waking up early to get to class” (cited by 69% of those polled) and “Getting too much homework” (64%). Rounding out the top five were “Not liking my teachers” (42%), “Not having the right clothes” (32%), and “Not fitting in” (31%).

The top back-to-school stress point for adults, on the other hand, was “Shopping for clothes and school items,” cited by 56% of those surveyed. The stress of shopping outranked hectic student schedules (50%), helping with homework (38%), bullying at school (31%), and bad teachers (29%).

At first glance, the results indicate that students and parents alike seem to be saying that shopping and having the right clothes are of higher importance than potentially huge problems like bullying and subpar teachers. Are most of us really that superficial?

Maybe, maybe not. A closer look at why consumers are so stressed about shopping shows that the big concern essentially comes down to money rather than pressure to be up on the latest fashion trends. According to data released last week by the National Retail Federation, “the average family with children in grades K-12 will spend $669.28 on apparel, shoes, supplies and electronics, up 5 percent from $634.78 last year.” The typical family with a high school student is expected to spend even more, $682.99.

Given the hefty back-to-school bill parents are facing and the fact that, for example, students are now expected to arrive at school in possession of 18 items on a classroom checklist, on average, no wonder shopping is stressing so many families out right about now. More than half of parents said that their No. 1 concern about back-to-school shopping was simply not being able to afford everything they’re expected to buy.

What’s more, it must be pointed out, many of these stress points are related. Parents and kids worry about shopping and clothes at least partly because they’re concerned about bullying and fitting in at school. And bullying and bad teachers, while possibly disastrous for the student experience, are far less common, one hopes, than the problem that seemingly every middle-class family budget confronts: affording all the stuff our kids want and/or that our kids’ school requires.

Nine out ten Americans in the ebates survey said that they’ll save during back-to-school shopping via coupons, discounts, and sales, among other methods. Retailers understand that consumers are primed to look for back-to-school deals at this time of year—in fact, many stores launched back-to-school offers before the last school year even ended—and virtually every Sunday circular is filled with school-related sales and deals lately. So no matter what your student needs to prepare for the fall, there’s almost no reason to pay full price.

If you’ve held off so far from making some or all of your back-to-school purchases, there’s good reason you might want to wait a little longer. No fewer than 16 states are offering sales tax holidays this summer, with the vast majority waiving sales tax on various back-to-school purchases for a few days around August 1.

MONEY Spending

Even Kanye Thinks ‘Luxury’ Has Become Code For ‘Rip-Off’

Kim Kardashian and Kanye West
Kim Kardashian (L) and Kanye West attend the "Charles James: Beyond Fashion" Costume Institute Gala at the Metropolitan Museum of Art on May 5, 2014 in New York City. Mike Coppola—Getty Images

There's a revolt against 'luxury' items, and it's coming from an unexpected place: the rich.

“Fancy” may be the song of the summer, but there’s a revolt brewing against brands that seem to offer more form than function.

Consumers fighting back against high-priced products wouldn’t be very surprising on its own. The economy is recovering, yes, but many Americans are still unemployed or are stuck doing low-paying or part-time work.

But this time around, it’s not just average Joes balking at the high price of a Gucci handbag. (Let’s face it, they weren’t the ones buying that kind of gear anyway.) Instead, criticism is coming from an unexpected corner of the market: the rich, the taste makers, and even the Louis Vuitton Don himself, Kanye West.

In June, the outspoken rapper appeared at the Cannes film festival and essentially declared war on so-called premium products.

“My goal in lifestyle, in everyday life—to change the idea of what luxury is,” said West. “Because time is the only luxury. It’s not all these brands that we just drove by that are somehow selling our esteem back to us through association.”

Kanye made the same point more explicitly earlier this month to an audience in London—this time with the aid of auto-tune. “It’s like they want to steal you from you, and sell you back to you after they stole it,” declared West in what would become a 15-minute rant against everyone from Nike and Gucci to the media and marketers. “They want to make you feel like you less than who you really are.”

It’s hard to tell whether Yeezy has actually turned on high end items or if this is another episode in his love-hate relationship with an industry that often spurns his increasingly desperate advances. Despite the recent outbursts, he’s still selling a Kanye branded plain white t-shirt for $90 a pop.

But if West’s criticism rings hollow, he’s not the only aesthetic icon slamming the ‘luxury’ label. On Friday, British designer Jasper Morrison, known for his utilitarian “super normal” style, let loose against anything marketed as upscale. “The most common mistake people make is believing the term “luxury,” Morrison told the Wall Street Journal. “It’s become an excuse for a lack of common sense, and invariably stands for overpriced, poorly considered product, whether it’s a hotel, an apartment block, a handbag or a holiday.”

It’s not just the creative class who have tired of paying $500 for a particular pattern. High-end consumers across the board are sick of it too. The Journal reports that growth in the luxury market has slowed, with sales rising 7% last year, down from 11% from 2010 to 2012. The reason? Sky high prices and a decreasing perception of quality.

While the cost of most goods has remained mostly stagnant during the recession, the price of luxury items has skyrocketed. The average price of luxury goods jumped 13% in 2013 while the consumer-price index rose only 1.5%. A Chanel quilted handbag is now $4,900, a full 70% more expensive than the same item five years ago.

Why are ritzy items getting more unattainable? The answer seems to boil down to two main factors. As the middle class shrinks, wealthy customers have been driving an ever larger percentage of retail sales. While many middle-market and low-end brands suffered in the wake of the financial crisis, businesses with a focus on high earners actually reaped a hefty profit. As a result, companies like Saks have been focusing more and more on the high-end. In the same vein, traditional top-tier brands seem to be raising prices to differentiate themselves from entry-level luxury products.

Another issue is the perceived quality of these so-called luxury items. According to the most recent Survey of Affluence and Wealth, published by YouGov and Time Inc., America’s richest consumers say companies don’t make the top-shelf like they used to. Seventy-eight percent of the affluent and wealthy report that many luxury goods are not compelling to them, and 71% of those surveyed claimed that most new products marketed as “luxury” are not what they consider to be luxury at all.

The result has been a developing consensus that many of these items are no longer worth the asking price. The Wirecutter, a website devoted to finding the “best” products in every tech category, is characteristic of this type of luxury backlash. In May, the site posted an article specifically devoted to convincing readers not to buy Beats, a premium brand of headphones marketed by celebrities like Jay-Z and Dr. Dre.

“Beats have positioned themselves as a luxury brand. And once you have a “high-end label mentality” at work, prices often go up higher than they should or need to be,” writes Lauren Dragan, the Wirecutter’s resident headphone expert. “While we’re happy to pay more to get higher quality, we aren’t willing to pay more simply for the name slapped on the side.”

MONEY Shopping

WATCH: Why You’re Spending More on School Supplies This Summer

Families are spending $75 billion this summer on pencils, electronics, clothing, and more.

MONEY Tech

Should You Snap Up a (Cheap) Plasma TV Before They’re All Gone?

A visitor looks at a Samsung ultraslim plasma flatscreen television.
Jochen Eckel—Bloomberg

First Panasonic. Now Samsung. With the big makers dropping plasma, now could be a smart time to buy a TV.

Plasma TVs are going the way of the floppy disk, Walkman, and VCR. This month, Samsung announced that it would stop making plasmas by the end of November. Panasonic got out of the game last year. That leaves just LG to carry the plasma torch—and that probably won’t last. Indeed, by 2016, research firm IHS says plasma TVs will be completely vanish from the U.S. market.

So, with plasma on the way out, should you expect to start seeing killer discounts on TVs that use the technology? And, if you do spot a plasma bargain, should you buy it, or will you just end up with a 60-inch doorstop?

Plasma Prices

Let’s start with prices. No need to hotfoot it to Best Buy right now, according to industry watchers. Panasonic’s exit from the market didn’t have a significant effect on prices, says Ty Pendlebury of CNET.com, and Samsung’s move is expected to be similarly uneventful, at least in the short term. However, that may change “at the very end,” Stephen Baker, vice president of industry analysis for the NPD Group. Eventually, retailers will be looking to move those last few plasmas to make room for newer stock and the markdowns will shift into high gear.

The average selling price for a plasma is currently $878, expected to drop 14% to $752 in 2015, according to IHS. On paper, plasmas seem more expensive than LCDs, which have an average price of $735. (A note: Some types of LCD TVs are often referred to LEDs. In this story, “LCD” refers to both types.) That’s misleading, though, because LCDs come in a range of sizes, while plasmas are only made in large (and thus expensive) sizes. When comparing TVs of similar size and quality, says Will Greenwald, who covers consumer tech for PCMag.com, plasma is cheaper.

The takeaway: If you’re in the market for a big TV, plasmas are a good deal and will likely get even cheaper. Just don’t expect to see fire-sale prices.

Is Obsolescence Really So Bad?

People who love plasmas–and they definitely exist–love them because they have great color contrast, a clear, sharp picture, and a wider “viewing angle” than LCD models, meaning you can sit further to the side of the screen without seeing a distorted image. However, they’re also massive energy hogs, and aren’t as thin or bright as other technologies.

The reason so many companies are dropping plasma has little to do with the technology itself. Rather, as LCD models have gotten better and cheaper to produce, it’s become less logical for manufactures to build and maintain factories capable of building only large, pricey plasmas.

Still, if you’re buying a technology that you know is headed for extinction, it’s worth considering what will happen if you need to get a new part for your plasma or have it repaired. Consumer Reports argues that TVs from the top brands are reliable and will continue to support their products. A Samsung rep echoed this, saying the company “will continue to provide support for our plasma TVs and our customer service policy will remain the same as before.” That said, it’s difficult to predict what repair options you’ll actually have.

So You Want to Buy

If you think a plasma could be the right buy for you, check out the Samsung F8500, which CNET dubs “the last great plasma TV.” Starting at $1,800 for the smallest 51-inch model, down from $2,700, “this TV is a very good value and will easily beat any LCD under $3,000 for picture quality,” says Pendlebury.

 

MONEY Shopping

Seriously, Here’s How You Know If You’re Addicted to Shopping

Woman with shopping bags
Peter Cade—Getty Images

For those who shop to relieve stress, "retail therapy" is no joke.

“It’s not just shopping, it’s retail therapy.”

As a bumper sticker or a joke between friends, this may be amusing. For those who shop to relieve stress, it’s not nearly so funny. Medicating or soothing painful feelings with money is no healthier a behavior than medicating with alcohol or food. When stressed or in difficult circumstances, some people drink, some people eat, and some people shop.

As a financial adviser, I’ve worked with several clients with extreme forms of this behavior, who described their spending clearly as an addiction. It gave them a physical “high” similar to that experienced by an alcoholic or drug addict. Like other addictions, it had destructive consequences, such as overwhelming debt, loss of life savings, ruined relationships, and even theft from family members or employers.

Using spending as a medicator does not always show up in such dramatic ways, however. Even people who seem to live moderately and manage money responsibly can be “therapy shoppers” who spend in order to make themselves feel better.

When I met Alexandra, for example, she was single, in her 40s, with a well-paying job and a substantial net worth. She was investing part of her income, was current on all her financial obligations, and had only a modest amount of debt. She was certainly not spending beyond her means or jeopardizing her future security. She didn’t appear to be in any financial difficulty.

When we looked at her budget, however, Alexandra was clearly uncomfortable with some of her spending habits. Instead of simply reassuring her that she was managing her money well and not overspending, I explored this issue with her. Eventually I brought up the possibility that she might be medicating her difficult emotions with spending. It was an “aha!” moment for her. She told me, “I’ve been doing that for years.”

Alexandra’s problem wasn’t the amount she spent. It was the reasons behind her spending. If she had a stressful day at work, she would go to the mall, in much the same way another person might stop at a bar for a couple of drinks on the way home. Shopping, finding bargains, and buying herself gifts were unthinking actions she used to soothe herself when she was upset.

She never stopped to ask herself whether she needed or even wanted the things she bought. She didn’t spend more than she could afford, but she was spending time as well as money unproductively. She was also cluttering her house and her life with clothes she didn’t wear, knickknacks she didn’t care about, and gadgets she didn’t use.

Once she realized the emotional reason for her shopping, Alexandra was able to find more constructive ways to deal with stress. She learned healthier responses to difficult days. Talking with a friend, writing in her journal, meditating, or taking a walk could serve the same purpose as a trip to the mall.

For Alexandra, simply recognizing that she was using shopping to soothe her emotions was enough to help her change. People with more deeply ingrained behavior might find change more difficult. In such cases, clients could benefit greatly from working with a financial therapist with the expertise to help them look at the emotions underlying their spending patterns.

The important point for a financial planner is to look beyond the numbers. The main issue isn’t whether a client’s “retail therapy” is affordable or whether it is causing serious financial difficulties. If a behavior is creating discomfort for clients, as it was for Alexandra, helping them explore what lies behind it can be a valuable service.

MONEY consumer psychology

Hey, Impulse Spenders: Here’s a Solution to Your Bad Habit

shopping bags
Martin Barraud—Getty Images

If you make too many impulse purchases and later regret them, there is a simple cure: gratitude.

A study recently published in Psychological Science shows that an attitude of gratitude tempers impulsive urges. In the study, participants had the option of receiving $54 now or $80 in a month. The researchers then induced moods of happiness, neutrality, or gratitude. Participants in the happy or neutral groups preferred the smaller sum immediately—the typical response in delayed gratification experiments.

The surprise came from those who felt grateful. They preferred to wait for the larger sum, which is the smarter, if less immediately gratifying, option.

The authors don’t say why gratitude forestalls impulsiveness, but their findings make sense within the context of my own research. I’ve found that people typically purchase impulsively for one of two reasons. They do so 1) to counteract a sense of emptiness, boredom, or void in their lives; or 2) because they are not fully focused when making a purchase. Gratitude can be the antidote in both of these scenarios.

Fill the Void
Impulsively snapping up a bargain or a trinket (or more) can provide an emotional boost, even a genuine momentary thrill. A void you feel—which can range in magnitude from simple boredom to a deep emotional need for human connection—is temporarily filled in the act. Sometimes the pleasure of some new “find,” or just the distraction of the transaction is subconsciously more what people are shopping for than whatever it is that’s actually being purchased.

People that “fill up” with impulsive purchases in this manner are often thought to be motivated by simple greed. What I’ve found, though, is that the catalyst is not so much greed or materialism, but emotional relief. Momentary lapses of impulse control are frequently fueled by an urge to feel something different—to get out of a funk and change your mood.

Feelings of gratitude, not just for possessions, but for almost anything—a friendly encounter, a cool breeze, a tasty lunch, a nice text from your kid, a beautiful landscape—are nourishing. It’s harder to feel a void or sense of emptiness when you pause and notice how much you have. It makes sense that everyone, not just shoppers, exhibit greater levels of impulse control when they feel thankful.

Get in Focus
Consumers’ minds nowadays are drawn in different directions by nonstop multitasking, and anxiety and sleep deficiencies are on the rise as a result. Focused decision-making, particularly on seemingly non-urgent tasks such as shopping, is on the decline, as is truly focusing on anything, it seems. No wonder I increasingly hear, “What was I thinking when I bought this?” from shoppers I interview. An exhausted, distracted brain pays less attention to everything and therefore has less bandwidth to forestall impulsive purchasing.

The calming focus of gratitude can help. A few seconds of thankfulness is not only a mood elevator, it’s a fast and simple mindfulness exercise that improves focus and can stave off mindless, impulsive spending.

But if you’re trying to rein in impulse spending, wouldn’t it make more sense to simply force yourself to pay closer attention to purchases, rather than trying to focus on feelings of gratitude? Well, no. Focusing on purchases is actually harder than it seems. Why? It’s boring when compared to the thrill of the purchase, and therefore consumers are apt to forget they’re supposed to be mindful and think twice about what they’re buying.

Also, paying close attention to purchases comes with the possibility of arousing negative emotions—feelings concerning problems with debt or budgeting, or pressures about responsibility and what you should or should not do. Our self-protective, irrational brains are likely to look for an easy “out” to get rid of these bad feelings, ironically often by simply losing focus and doing things mindlessly, impulsively. That’s why so many consumers experience a mismatch between their good intentions and ultimate actions when it comes to shopping.

Gratitude is a gentle way to force focus, and it creates a sense of abundance that transcends the need for a momentary shopping boost. As a bonus, there are lots of other benefits to feeling and expressing gratitude—most notably, happiness.

_____________________________________________________

Kit Yarrow, Ph.D., is a consumer psychologist who is obsessed with all things related to how, when and why we shop and buy. She conducts research through her professorship at Golden Gate University and shares her findings in speeches, consulting work, and her books, Decoding the New Consumer Mind and Gen BuY.

MONEY Shopping

WATCH: Amazon Sued After Kids Spend Wildly on Apps

The Federal Trade Commission alleges that Amazon made it easy for kids to make unauthorized in-app purchases — and hard for their parents to get refunds.

MONEY Kids and Money

How to Keep Your Kids From Racking Up Big In-App Charges

Kids have run up big bills on their parents' tablets. Paul Bradbury—Getty Images

The FTC says Amazon let children run up hundreds of dollars in unauthorized charges for in-app purchases. Here’s how to make sure your kid’s screen time doesn’t cost you a small fortune.

If you’ve been using your Kindle Fire as an electronic babysitter, beware that it might cost you more than a real babysitter. In a new lawsuit, the Federal Trade Commission says that Amazon has wrongfully billed some parents for unauthorized app purchases made by children.

How? Many free apps marketed towards kids let users make additional “in-app” purchases as they play the games. For example, download the free app “Tap Zoo,” and your kid can fill a virtual zoo with imaginary animals and habitats. Sometimes those items cost imaginary money – but other times, they cost real money, the FTC says.

The federal agency cites one customer hit with $358 on game bills (it doesn’t say which game.)

We’ve heard this story before: In January, Apple agreed to settle charges that it too had billed parents for unauthorized charges on kids’ games. But Amazon has pledged to fight the FTC’s lawsuit, arguing that the company has responded promptly to customer complaints, refunded purchases by kids and improved parental controls since launch.

As technology evolves to make it easier and easier to spend money, kids’ apps will likely remain a battleground. But in the meantime, here’s how to keep your kid’s virtual zoo running under budget.

The simplest solution: Turn off in-app purchases entirely.

On Kindle Fire, go to settings for the Amazon Appstore and turn off “in-app purchasing.” Apple products will let you disable the ability to install apps, delete apps or make in-app purchases. Just go to settings and tap “enable restrictions.”

At the very least, set up a password for in-app purchases.

Require that all users type a password before making any purchases – and make sure it’s a different password than the one you use to unlock your device. On Apple products, go to settings and tap “enable restrictions.” On Kindle Fire, go to settings and adjust “Parental Controls.” But here’s the problem: On Kindle Fires, each time you enter your password to buy something—say your kid badgers you into letting him buy that one new animal—the FTC says there’s a window of time when (15 minutes to an hour) when anyone using the device can continue making in-app purchases.

The FTC also argues that the password prompt is vague and doesn’t explain how much you’ll be billed. So enter that password with caution.

Do a little research before you let your kid buy an app.

Maintain a healthy suspicion of “free” apps. Oftentimes, free apps make money by collecting data about users, showing users advertising, or encouraging in-app purchases. But it’s not always easy to tell which apps will let your kid run up a huge bill. As of 2012, about 84% of the apps that let kids make in-app purchases were advertised as “free,” according to an FTC survey. Before you buy an app, read the full description to see if it allows in-app purchases. Also read reviews for the app, and try it out yourself before you let your kid play with it.

Switch to airplane mode or turn off Wi-Fi.

“Airplane mode” is a setting that turns off Wi-Fi – making it impossible to buy or download apps, or do anything else online. Quickly turn it on before handing over your device, and your kid should be able to play without making any new purchases. On Apple products, you can turn on airplane mode or turn off Wi-Fi under settings, or by swiping from the bottom of the screen and tapping the airplane icon. On Kindle Fire, you can turn on airplane mode by going to “Quick Settings” and then “Wireless & Networks.”

Did your kid run up a huge bill on a mobile device? How did they do it? Did you get a refund? Do you have any advice for other parents?

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